Major Financial Challenges Affect Most People

The data show that, regardless of economic conditions, people are still struggling financially. Most people are worried about their finances and many understand that even a small unexpected expense could derail their financial situations and put them at risk. While the consequences can be more severe during economic downturns, the data indicate that even during strong economic conditions most people are experiencing severe financial problems.

Today, these problems have reached epidemic proportions, with most people suffering from the impact of long-term financial problems. Half of Americans are considered poor or low income; two-thirds of the population report that they would have trouble coming up with $1,000 for an emergency; and 78% of workers live paycheck-to-paycheck, with the majority of their income going toward debt. We have a serious problem.

The problems people face stem from similar root causes: poor financial behaviors and lack of knowledge and skills to work toward greater financial security are common population deficiencies.

Research, Statistics & Quotes

The US Census shows that 1 in every 2 people are poor or low-income. Nearly half of Americans are low-income as rising expenses and unemployment shrink the middle class.

Forbes

39.4% of adults said their families had trouble meeting at least one basic need for food, health care, housing, or utilities last year.

Urban Institute Survey as reported by MarketWatch

Lack of knowledge about personal finance cost Americans over $280 billion in 2017.

National Financial Educators Council

Only one in four have a written financial plan.

Charles Schwab

The lowest preretirement income quartile would need to defer retirement age to 84 before 90 percent of the households would have a 50 percent probability of success.

Employee Benefit Research Institute

65% of workers have less than $100K saved for retirement, with nearly 50% having less than $25K. AARP 2017 retirement confidence survey

A couple can expect to spend $275K in out of pocket medical expenses in retirement.

Washington Post

1 in 4 young people dip into 401(k)s to pay off debt

CNBC

About half of households age 55 and older have no retirement savings (such as in a 401(k) plan or an IRA).

Government Accountability Office

Studies have shown that retail investors lack an understanding of how compound interest or inflation work. The losses that result are estimated to set our economy back by some $10 billion a year.

DALBAR

Americans had $1.021 trillion in outstanding revolving credit of which $1 trillion is credit card debt. The average monthly balance for borrowers who cannot pay their balance in full is $9,600 and $1,254 is paid in credit card interest each year.

The Hill

Over 2.5% of those age 60 have student loan debt.

Consumer Financial Protection Bureau

The average student in the Class of 2016 has $37,172 in student loan debt.

Forbes

Americans owe $1.3 trillion in student loans. More than seven million borrowers are in default, and millions more are behind on their payments.

New York Times

Currently, 43% of card holders carry a balance each month. Their ranks actually fell 1% in the second quarter of 2017, after rising slightly in the first quarter.

Experian

About 32% of Americans pay the minimum amount monthly on their credit card debt.

FINRA

Credit card debt is at an all-time high with an average American in debt to the tune of $6,375 as reported by Credit Karma; this is a 3% increase from 2017.

CNBC

Two-thirds of US would struggle to cover $1,000 crisis.

The Associated Press-NORC Center for Public Affairs Research

A recent Federal Reserve Survey found that 44% struggle to come up with $400 for an unexpected expense. This lack of a well-funded emergency fund happens throughout the income scale.

Federal Reserve

50% do not have a “rainy day” fund.

FINRA

Nearly half of Americans say their expenses are equal to or greater than their income. And for those aged 18 to 25 the percentage is over half, up to 54%.

Study by the Center for Financial Services Innovation as reported by CNN Money

A Gallup study shows 33% of Americans prepare a detailed household budget and a U.S. Bank study shows similar results with only 41% having a budget.

Gallup & https://stories.usbank.com/dam/possibilityindex/USBankPossibilityIndex.pdf

More than 19 million households in America (or about 30 percent of all renters) pay more than half of their monthly income on housing.

Department of Health & Human Services as reported by Olympian Management

Younger adults are spending a stunning amount of money on rent — $93,000 by age 30, according to a new study. More important, rent sucks up about 45% of their income during their first, critical decade in the workforce. That leaves precious little left over to save for a down payment and work toward entering that second phase of adulthood — household formation.

USA Today

Nearly a third of Americans have a credit score lower than 601 according to credit bureau Experian.

Fox Business

About 77 million Americans, or 35 percent of adults with a credit file, have a report of debt in collections. These adults owe an average of $5,178 (median $1,349).

Urban Institute

Small/medium business owners and managers across the United States were asked, “Has your company conducted a credit or financial background check as a condition of hiring or giving a promotion?” The results indicated that 25.9% answered “Yes.”

National Financial Educators Council

The NFEC asked 3,514 individuals, “Has an employer or potential employer ever conducted a credit or financial background check as a condition of hiring you or giving you a promotion?” Of the 1,100 respondents, 26.3% answered “Yes,” with 4.08 saying they were turned down for a job.

National Financial Educators Council

A Career Builder study found 78% of full-time workers said they live paycheck to paycheck; these results are similar to a Charles Schwab study that found 3 out of 5 Americans living paycheck-to-paycheck.

CNBC & Charles Schwab

“One in four unemployed Americans have been required to go through a credit check when applying for a job, and one in ten have been denied jobs due to information in their credit report.

Demos survey as reported by CNN

The national survey of 1,000 adults found that 42 percent of all cardholders have neglected at least one card payment. The most common reason was forgetting (60 percent), followed by not having enough money (35 percent), being too busy (13 percent), and traveling (11 percent).

CreditCards.com

Almost one-fifth (18 percent) of consumers have incurred an overdraft penalty fee in the last year.

Pew Trust

More than two of five (28%) marketplace enrollees and a quarter of people with employer health insurance plans are underinsured.

Commonwealth Fund

Half (52%) of underinsured adults reported problems with medical bills or debt and more than two of five (45%) reported not getting needed care because of cost.

Commonwealth Fund

A RAND Health study shows that the doubling of health costs between 1999 and 2009 largely wiped out an average family’s real income gains. In fact, in 2009 the family had a net gain of only $95 per month. If health care costs had tracked general inflation over the decade, the family would have had nearly $5,400 more in 2009.

RAND

Insurance premiums expected to rise 4% to 6%, before factoring in COVID

Society of Actuaries as reported by Yahoo! Finance

In 2018 the average annual premium for employer-based family coverage rose 5 percent to $19,616; for single coverage, premiums rose 3 percent to $6,896. Covered workers contributed 18 percent of the cost for single coverage and 29 percent of the cost for family coverage, on average, with considerable variation across firms.

NCSL

NFEC Position Statement

People are going through financial hardships. From kids who lack basic necessities, to families seeing their dreams of retirement slip away – the financial challenges people face today have powerful impact on their health, well-being, and security. The epidemic of financial problems is vast.

It is the NFEC’s mission to provide tools, training, and resources to those who teach personal finance and advocate for increased access to financial literacy education. We honor our financial education champions and partner with them to spur this vitally important movement forward. No matter the size and scope of a program, our goal is to help it expand, improve results, and scale, so the effort can reach more people with this much-needed information.